Impact of Income Inequality on the Canadian Economy
The impact of income inequality on the Canadian economy is revealing itself in different ways. Income inequality refers to the extent of uneven distribution of income in a country. From 1990, the richest people in Canada have been increasing their total share of the national income. On the other hand, the middle income and the poorest groups have been losing their share of the national income. Despite the widening gap between the poor and the rich in Canada, the poorest group has had a rise in income levels, albeit minimally. The widening income inequality gap raises the question of the effects of this inequality on the economy of Canada.
The major impact of income inequality on the Canadian economy
The effects of income inequality on the economy of Canada are far reaching.
They include the following:
- Diminishing economic growth
Today, business establishments in Canada are raising their concerns about the current state of income inequality in Canada. This is because income inequality diminishes the growth of the economy since it implies that the skills and capabilities of the citizens are not being used fully in Canada. This increases social tension which affects the economy negatively.
- Decline in purchasing power
Income inequality in Canada has led to a decline in the purchasing power of some consumers. Traditionally, what economic growth meant was that everybody in a country could benefit. However, this is not what is happening in Canada. Due to income inequality in Canada, the rich Canadians are getting richer and the poor are getting poorer, increasing income disparity.
- Social inequality
Some Canadians, especially the low income earners, are facing increasing odds of being stuck in tax bracket while high-income earners accelerate income growth. This implies that poor Canadians and their children will not have a chance to enjoy the pleasures and necessities that people strive for every day. The effect of this is social inequality which can lead to other social problems like increased crime rates which eventually will affect productivity at the workplace. For instance, if a CEO earns a salary that is three times more than that of a junior staff, the junior staff will be demoralized and this will lower their productivity.
- Poor healthcare
In Canada, healthcare should be a great equalizer. However, due to income inequality low income earners cannot access a family doctor or even early treatment to medical problems. This has led to poor health for low income earners. This trend is likely to affect the economy via increased healthcare bills and lost productivity.
- Education inequality
With income inequality come education inequality. Neighborhoods in Canada are becoming polarized along the income lines. This is making fulfilling the promise of giving equal education to children harder. The use of income data and standardized test scores paints a clear inequality picture in the public elementary schools in Toronto. High achieving schools are found in high income areas while low-scoring schools are found in low income areas. This disparity will eventually affect the economy negatively because it will only widen the income gap because children from high-achieving schools will get better job and the trend will continue if nothing is done to address the income inequality issue.
How the impact of income inequality on the Canadian economy can be addressed
To address the effect of income inequality on the economy of Canada, the government should restore fairness in the tax system. Skills training should also be offered to students in both high income and low income areas. The government should also offer support to the working poor by rewarding them properly to reduce the financial strain that they and their families are facing. Additionally, the Canadian government should ensure that all people get health benefits and come up with pension plans that cater even for those whose work is less stable.
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